The Company reported revenue for the second quarter increased 35% to $7,319,000 as compared to the second quarter of 2010, as well as 7% sequentially as compared to the first quarter of 2011.

Malrborough, Mass. – Bitstream Inc. today reported that total revenue increased by $1,884,000 or 35% to $7,319,000 for the three months ended June 30, 2011 as compared to total revenue of $5,435,000 for the three months ended June 30, 2010 and by $506,000 or 7% sequentially as compared to $6,813,000 for the three months ended March 31, 2011.  The Company's aggregate cash, cash equivalents, and investments at June 30, 2011 totaled $10,402,000, a decrease of $1,054,000 from a balance of $11,456,000 at March 31, 2011.

"We are pleased to report that revenues increased sequentially for the fifth consecutive quarter to $7,319,000 for the second quarter of 2011, exceeding the $7 million threshold for the first time," said Amos Kaminski, Executive Chairman and Chief Executive Officer.  "The increase from the prior year was the result of increased sales across all of our product lines, as well as across all of our channels. We are also pleased that Elly Perets has joined us as Vice President of Sales and Marketing for our publishing products.  Elly will be responsible for managing all of the functions that support our goals for growth and market development, overseeing the direct selling effort, managing relationships with our OEM partners, as well as driving our marketing strategy and helping expand the reach of Pageflex products into new regions.  As a result of our ongoing exploration of strategic alternatives, we continue to actively pursue a sale of the business, in whole or in part. No definitive agreements or understandings have been reached and there can be no assurance that any such transaction will be consummated."

The increase in cost of license revenue for the three months ended June 30, 2011 as compared to the three months ended June 30, 2010 is due to the increase in direct third party cost of $774,000, which is primarily comprised of royalties from the sale of third party products of $499,000 and $244,000 from hosting fees for the browsing product line. Prior to the monetization of the browser user base, hosting fees had been classified as a research and development expense which was its primary function at that time.  Cost of services increased primarily due to the additional personnel added with the iWay acquisition.

Operating expenses increased $1,607,000 to $5,177,000 for the three months ended June 30, 2011 from $3,570,000 for the three months ended June 30, 2010. Marketing and selling expense increased $132,000 primarily due to additional costs including personnel associated with the acquisition of the iWay product line. Research and development expenses increased $449,000 primarily due to increases in personnel and benefit costs of $551,000 partially offset by the inclusion of $244,000 of browser hosting costs in cost of license revenue at June 30, 2011. General and administrative expense increased $1,026,000 including $695,000 associated with the resignation of our former CEO, $150,000 in professional services relating to the Company's exploration of its strategic alternatives, and $278,000 related to the establishment of an office in Israel in June 2010. These increases were partially offset by a decrease in stock compensation expense of $152,000 from the forfeiture of stock option held by the former CEO.

GAAP Loss

Our loss from operations increased $640,000 to $1,354,000 for the three months ended June 30, 2011, as compared to $714,000 for the three months ended June 30, 2010. Our net loss increased $566,000 to $1,251,000 or $0.12 per share for the three months ended June 30, 2011 as compared to $685,000 or $0.07 per share for the three months ended June 30, 2010.

Non-GAAP Loss

Our non-GAAP results exclude stock-based compensation expense, the amortization of intangible assets primarily acquired from Press-Sense Ltd., acquisition costs for certain assets of Press-Sense Ltd., and the cost of the resignation agreement with our former CEO.  Our non-GAAP loss from operations increased $329,000 to $423,000 for the three months ended June 30, 2011, as compared to $94,000 for the three months ended June 30, 2010. Our non-GAAP net loss increased $255,000 to $320,000 or $0.03 per share for the three months ended June 30, 2011, as compared to $65,000 or $0.01 per share for the three months ended June 30, 2010.  A reconciliation between GAAP and non-GAAP results is provided at the end of this press release.